California

Consumer Reports: Rent-to-Own Caution

Looking for an affordable way to buy that new refrigerator or living room set? Shopping at a rent-to-own store may seem like the best option if you're short on cash. But Consumer Reports warns that some of those so-called deals could end up busting your budget.

Consumer Reports took a close look at some offers at the industry's two biggest chains: Rent-A-Center and Aaron's, and found that their monthly payment plans could cost you hundreds of dollars more than paying outright. If they were loans, the equivalent interest rates would be 50 to 150 percent.

NBC 5 reached out to Rent-A-Center, the company offered the following information in response to Consumer Reports:

Pricing:

  • Rent-A-Center’s prices are reflective of a labor-intensive industry.  For example, delivery, setup, pickup, repair, and service loaners are all included in our price. As you might imagine, our labor costs are greater than those of traditional retail outlets.
  • Fewer than 2% of all customers go all the way through the agreement to the end. Virtually all customers who acquire ownership do so by taking advantage of our 90 Days Same-As-Cash program, under which the customer pays half or less of the total, or under our early purchase option program, which comes into play after the initial 90 day period. Under this EPO program, the customers take advantage of a discount against the remaining rent, usually in the range of 20 to 40%.
  • Our purchasing power is lower than big-box stores which purchase merchandise at greater discounts.
  • Each price tag and rental agreement provides a description of the item, its weekly price, the number of weekly payments required to acquire ownership, the total cost of the item if all payments are made, the cash price of the item (good for the first 90 days), whether the item is used or new, the item number, the model number and the serial number.
  • Rent-A-Center’s profit margins are similar to that of other retail chains. The rent-to-own business is not unusually profitable.
  • If there were a way to run our business at a lower price point, others would no doubt enter the business and undersell us.

 The Agreement Itself:

  • Rent-A-Center’s rental-purchase agreements are closely regulated in 47 states, Puerto Rico and the District of Columbia by transaction-specific regulations that mandate clear and conspicuous disclosure of all terms and conditions.
  • The rental-purchase nature of the agreement is prominently cited atop the agreement and repeated throughout the agreement. 
  • The exact payment due and its frequency is plainly and noticeably cited on the rental-purchase agreement along with the number of payments necessary to acquire ownership through monthly rental payments.
  • Each rental-purchase agreement includes an easy-to-read and prominent schedule stating the payment amount necessary to exercise an early-purchase option at any given time.

Saving to Buy Versus Rent-to-Own:

  • Saving up for months may be a suitable solution, so long as it isn’t your children sleeping on the floor. Understandably, shoppers are looking for a solution that meets their immediate need: In this case, it’s getting their children off the floor and into a bed.    This question arises from the mistaken notion that most of what we rent is high-end TVs. In point of fact, most of what we rent are the essentials, the things that people who have cash and good credit take for granted. Big TVs represent less than 10% of our overall business.
  • The bottom line is that life doesn’t wait: Clothes needs washing today. Milk needs to be kept cold now.

Collection Practices:

  • With millions of customer contacts every day, Rent-A-Center enjoys an extremely low complaint volume and has earned an “A” rating with the Better Business Bureau.  
  • Rent-A-Center has exacting internal guidelines governing its collection practices. 
  • Rent-A-Center employees benefit from rigorous and on-going training with respect to its collection practices.  
  • Rent-A-Center conducts business fully within applicable state and federal law. In fact, the company requires its coworkers to comply with the requirements and restrictions of the federal Fair Debt Collection Practices Act even though that law does not apply to our business.

NBC 5 also reached out to Aaron's, the company offered the following response:

 
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The high prices may not be the only downside of rent-to-own. The major chains have been accused of violating consumer laws in California and Washington, including abusive collection tactics and charging improper late fees. The retailers settled those cases without admitting any wrongdoing. If you have any issues, you can file a complaint with your state attorney general.

Consumer Reports' advice: If you decide to shop at a rent-to-own store, you need to take a close look at your contract, and make sure you can actually afford to make the payments on time. Even better, save up your money and pay upfront.

Complete Ratings and recommendations on all kinds of products, including appliances, cars & trucks, and electronic gear, are available on Consumer Reports' website.

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